Abstract
Using a unique setting where stand-alone banks submit filings to bank regulators instead of to the SEC, we examine the consequences of fragmented securities regulation on disclosure compliance and information-processing costs. Consistent with the theory that bank regulators are less concerned about transparency than the SEC is, we find that bank regulators’ disclosure requirements are laxer, and stand-alone banks are more likely to violate filing deadlines. We further examine whether the disclosure system maintained by bank regulators (FDICconnect) generates higher information-processing costs. We find that the market reaction to insider filings by stand-alone banks is less timely. We also find that retail investors trade less on insider filings on FDICconnect than large informed investors do. Our findings suggest that regulatory fragmentation undermines market efficiency and disadvantages retail investors by affecting information-processing costs.